The insured are insuring the insurer. It would be funny if it weren't serious.

They won't have to write down their AAA junk because they will provide money to be given back to them if the bond issuers default. I think some New York regulator is very cynical and has a very weak sense of the absurd.

I try to avoid making predictions, but it sure looks like the Prodi government is about to fall.

Italian Prime Minister Romano Prodi just won a vote of confidence in the chamber of deputies, however, Italy he also needs the confidence of the Senate which was elected without the bonus for the coalition with the plurality of the popular vote (won by Prodi's olive tree coalition by 0.07% in the election licensed to thrill).

The crisis began when a judge ordered the preventive pretrial detention in house arrest of Sandra Lonardo the President of the regional council of the region which includes Naples. She was accused of pressing the administrator of a hospital to appoint certain attending physicians (primari) recommended by her. This is improper, but it is not clear that it is criminal (also it is a very common practice). Prosecutors can obtain pre-trial detention very easily in Italy (while a final conviction takes effectively forever (that is until the statute of limitations runs out) if the defendant is rich enough to have fancy lawyers who know how to delay things as in why is Silvio Berlusconi not in jail).

The legal troubles of the President of the Campanian regional council triggered the (threatening) collapse of the Prodi government, because she is married to Clement Mastella leader of the UDEur and its delegation of 3 senators (out of 322) obtained, because he allies with the highest bidder whether left or right and not because of popular support.

Mastella claims he lost confidence in Prodi because the current (soon to be ex?) majority did not show enough solidarity in the face of this improper assault by magistrates. I mean that is what he says. Publicly. As if it's not a disgraceful confession.

My extremely alert brother in law, Francesco Addis, suspects that his real aim is to block a reform of the electoral law. The much discussed reform aims for "governability" that is eliminating the little parties like the UDEur. Makes sense, although I was assuming it would go no where, since I assume that Berlusconi was bargaining in bad faith.

If, in fact, the second Prodi government falls after 20 months, he can at least point to his accomplishments such as ... none come to mind. It's hard to govern when the prime minister can be brought down by a micro party or two.

Republicans are still unwilling to over-ride Bush's veto of SCHIP expansion. Note that it would be, among many other things, an economic stimulus. SCHIP subsidizes insurance for children not poor enough for medicaid but still pretty poor (eligibility differs across states). The argument against SCHIP expansion is that firms which currently pay for coverage of employees children will stop so SCHIP partly crowds out private provision of health care. It would provide insurance to children who don't have it but also amount to a subsidy to some employers of low wage workers out of general tax revenue. This cost is ... a benifit.

Clearly it is a good idea to subsidize employers of low wage people. The increased demand for currently low wage workers will increase their wages at the expense of consumers (good) and reduce their unemployment (excellent also for the Federal budget).

The worst thing about SCHIP is that it subsidizes some employers of low wage workers therefore it is wonderful. Only an ideologue who thinks that any increase in public spendiing is bad can oppose SCHIP expansion. Sad to say, more than one third of Republican Representatives are such ideologues.

Peter Baker and Jonathan Weisman report in the Washington Post that Bush Pelosi Reid and Boehner are putting partisan differences aside to bite the bullet and cut taxes. I actually agree with most of what they are doing. Also I found the article highly informative.

The main proposal is a one off rebate with checks to be mailed immediately with the aim of causing consumption to increase right now, which is good if monetary policy is insufficient to prevent a recession (I see plenty of space between a 3.5% target federal funds rate and the liquidity trap so I'm not sure fiscal stimulus should be used before the monetary pedal is to the medal* but it's coming and the only debate is will it make sense as fiscal stimulus). The problem with fiscal stimulus is that most people will save most of the money so it will cause a small permanent increase in consumption not only in the near future with possible insufficient aggregate demand but also in the medium term with consumption crowding out investment.

The solution, of course, is to send the money to people who will spend it right now which means poor people especially people who are temporarily poor. The Bush administration appears to have abandoned the principle of anti egalitarianism at all cost and agreed to let congress send money to people who will actually spend it now (because they really need it right now).

They also are reintroducing accelerated depreciation to encourage investment. This was one of Reagan's policies in the early 80s. As implemented then, it was a disaster, because it was a subsidy principally for capital goods which don't really depreciate, that is, structures. The result was a lot of empty office buildings -- a commercial real estate bubble (followed by a crash and the S&L crisis). Just like the Bush administration to deal with a bubble bursting by trying to blow another.

I think the investment tax break will only apply to investments in the near future. this makes sense as the distortion will be small and the stimulus large as it partly will consist of speeding up investment planned for the future.

Of course, the distortion of an investment incentive doesn't have to be so bad. There is a reasonable case (based on real live evidence) that a subsidy to investment in equipment (as opposed to buildings) causes an improvement over laissez faire. Like that's ever going to happen (certainly not when there is a slow down concentrated in construction).

I'd say that if the checks to the poor are as large as the checks to the non poor (full refundability of the one off tax credit) that this is good news. If, in the end, the poor get the scraps (and how well have Democrats negotiated with the Bush administration and congressional Republicans so far) then it is bad news.

update: Pelosi caves. Checks go only to workers and not to the unemployed. this in exchange for refundability, that is, even those who don't pay income tax get checks. Also the bipartisan plan does not extend unemployment benefits or spend more on food stamps, the investment incentives apply to plant as well as equipment (no surprise). Now why the hell did Pelosi have to reach a bi-partisan compromise ? She could have forced the plan she wanted through the House and have Reid negotiate. Now he will compromise between her compromise and the Bush plan in the Senate.

Monday, January 21, 2008

He claims that Reagan's performance on unemployment was not so good. In the figure he starts in the middle of a pre-Reagan recession and ends just before the economy took off. I'm not sure the figure could have been cropped in a way more favorable to Reagan or less convenient for* Krugman.

Now that is honesty.

*mindo corrected. I wrote "of" for "for" for some reason. I am not being at all sarcastic. I really am impressed by Krugman's extraordinary honesty. A time series whcih started earlier and ended later would not have been dishonest and would make Reagan look much worse.

Back in September I argued at great length that General Petraus was misleading congress presenting numbers calculated according to secret formulas which showed a decrease in civilian deaths in Iraq and civilian deaths due to sectarian conflict in Iraq.

Soon thereafter, there was an undeniable decline in civilian deaths in Iraq as measured not only by the US military in Iraq but also independent observers.*

However, I am still convinced that Petraeus' testimony was misleading. A general objection is that Petraeus included deaths reported by Iraqi sources which showed a huge peak before the surge. The decision to include them was clearly made late so figures on the same month changed and one month had, for a while, more reported deaths than reported casualties. US military sources in Iraq agree that the Iraqi data was processed with a lag, that is, data for July and August 2007 were not comparable to data from January 2007.

My personal objection is that the appalling massacre of Yazidis on August 14 2007 did not seem to appear in the data. Washington Post fact checker was provided with an alternative explanation, that the initial death count of 572 was overstated. As noted by Atrios, it was understated. The current estimate is 796 according to Reuters.

I don't see a legitimate reason why the death count should be adjusted down and then up.

*One possible explanation is something else which happened on the day Petraeus testified

American forces raided a tent camp in the desert near Sinjar, close to the Syrian border. The raid’s target was an insurgent cell believed to be responsible for smuggling the vast majority of foreign fighters into Iraq.

[snip]

The records also underscore how the insurgency in Iraq remains both overwhelmingly Iraqi and Sunni. American officials now estimate that the flow of foreign fighters was 80 to 110 per month during the first half of this year and about 60 per month during the summer. The numbers fell sharply in October to no more than 40, partly as a result of the Sinjar raid, the American officials say.

[snip]

After the raid on the Sinjar cell, the number of suicide bombings in Iraq fell to 16 in October — half the number seen during the summer months

[snip]

The raid happened in the predawn hours of Sept. 11,

Petraeus testified on September 11 and could not be reporting results of the raid.

The post is brilliant (especially the part about can you imagine Reagan saying "...").

However, it includes one really dumb line which I want to jump on --"adopting hot button conservative issues like social security."

No Digby. Non conservatives can not agree that "social security" is a conservative hot button. Social Security is the third rail, the holly grail. We absolutely can't let it be their issue. Also, of course, it isn't. I mean it is the rail on which they electrocuted themselves remember ?

Now Obama has a proposal to strengthen social security that would actually strengthen it rather than dismantle it piece by piece. This is a very powerful political weapon.

Arguing that he is over-emphasizing the seriousness of the problem of the actuarial soundness of the SSA pension and disability trust fund (0.1 on a scale from 1 to 10 of problems the USA faces) is missing the point. This is a campaign. This is politics. You promise to give people what they want, in this case a pension. The fact that it will be easy is an advantage not a problem.

The main point of the post, you don't seize the day by playing safe, is absolutely correct and very important.

People who pay attention to pointless bloodshed are familiar with the concept of the Mahdi, the Moslem Messiah who will lead the forces of righteousness in the Moslem last days. Sad to say, many people have claimed to be the Mahdi. One, for example, is the leader of the Mahdi revolt in Sudan. His descendent Saddiq al Mahdi was the elected Prime Minister* of Sudan who couldn't even get a bill passed in Parliament releasing non Moslem Southern Sudan from the Sharia and was overthrown by the current non messianic but depraved General Omar Hassan al-Bashir (my joy at the thought of British imperialist turning over in their graves ended when I discovered how many Sudanese would join them due to Al Mahdi's fecklessness).

Still more amazingly, I learn that to Shi'ites and Suffi's the final battle of good against evil will be a tag team match with the Mahdi and Jesus Christ teaming up against the bad guys. I wasn't sure the Los Angeles Times's got this right but Wikipedia agrees.

Don't you think that the Shi'ite "Left Behind" alliance could be potent ?

"I didn't really understand why there was any such thing as bond insurance to begin with. "

He points to an explanation in The Wall Street Journal

Investment banks paid ACA annual fees for bearing the risk in their debt securities. This shielded them from the impact of market-price fluctuations, so the banks didn't have to reflect such fluctuations in their earnings reports.

I suspect that there may have been another reason related to prudential regulations.

I should know more than I do, but I think there is another explanation of the existence of bond insurance -- evading prudential regulation. Banks are not allowed to gamble as much as they choose but are subject to capital requirements. These restrictions are typically binding. They do not fully reflect diversification of risk. I sure don't understand them. I think this knowledge, which I lack, is valuable as it seems to be systematically deleted from google books previews of just enough to make you buy the book.

I suspect that bond insurance allowed banks to bear more risk than they would otherwise be allowed to bear. Relaxing capital requirements can be hugely profitable. One way in which Long Term Capital Management made money was swaps which allowed ordinary investors to bear the risk of default of 10 year lira bonds issued by London banks and banks to bear the risk of default by the Italian treasury. Ordinary investors (including me) had less faith in the Italian treasury. Italian BTP's were, to European regulators, super safe (couldn't single out a European country by name as a bad credit risk). This created an anomoly worth hundreds of millions of dollars a year.

If banks are allowed to invest in bonds that will default when the housing bubble bursts so long as they buy insurance from corporations which will go broke when the housing bubble bursts, they will. I think they were allowed and they did.

Wednesday, January 16, 2008

Fro the Ridiculous to the Sublime

Below see how the ridiculous David Brooks got two names wrong in one sentence.

Now the sublime Matthew Yglesias (written without irony or dignity) writes about Persident "Bush getting friendly with [the late] King Fahd." I don't like Bush either but accusing him of necrophilia is a bit much.

Tuesday, January 15, 2008

All the habits of verbal thuggery that have long been used against critics of affirmative action, like Ward Churchill and Thomas Sowell, and critics of the radical feminism, like Christina Hoff Summers, are now being turned inward by the Democratic front-runners.

Ward Churchill? No, he's the nutcase University of Colorado professor who suggested that the victims of 9/11 were fascists.

He neglects to mention that the critic of radical feminism is named Christina Hoff Sommers as is shown by googling Christina Hoff Summers (that is of Germanic not Anglo Saxon ethnicity).

That's two errors in one sentence. No wonder the New York Times is our journal of record.

Oddly Zaslof described Brooks' column as "decent." I have a more substantive complaint than the difference between "Connerly" and "Churchill" let alone "Summers" and "Sommers."

Brooks says that "Obama ... [has] eagerly donned the mantle of identity politics." and presents no evidence whatsoever. My impression is that Obama is careful never to mention his race (this is based mainly on listening to his Iowa victory speech and the fact that everyone but Brooks says so).

Brooks presents no specific evidence to support his claim that the Obama campaign is playing the victims. He doesn't even hint that Sen. Obama himself has said anything which might be construed as playing the race card, playing the victim or noting that there might still be at least one racist in the USA.

Finally Brooks notes that Clinton supporters have said unreasonable things. Does this mean that Brooks is playing the race card ? Dedicating himself to identity politics ? Using all the verbal thuggery ...

Ok the answer to the last one is clearly yes. Brooks is insinuating something he can't prove, because it isn't true, then directly stating it using strong language, while hoping the reader hasn't noticed the weasel words where the evidence might have been presented.

Monday, January 14, 2008

Condoms were used for every act of vaginal intercourse with a brothel client during the study period, as well as in the previous year. In the prospective study phase, condoms were used in 353 acts of vaginal intercourse with clients. No condoms broke, and none fell off the penis during intercourse.

he also claims "and there hasn't been a single case of HIV since 1988." (citation needed).

Balko does not address the question which is obvious to everyone living in an industrialized democracy other than the US and Malta (citation needed). If prostitution is a crime and prostitutes are obviously the victims, why do you make their problems worse by declaring them to be criminals ? In normal countries pimps are ciminals but prostitutes and johns aren't. In the semi normal UK Pimps and johns are criminals and prostitutes aren't. I think the US approach of punishing the victim was eliminated in other developed countries (where it ever existed) long ago (citation needed).

Now my guess is that, in Italy, prostitution is more similar to prostitution in Chicago than it is to prostitution in Nevada (I have no evidence) and I support legalization. Still mixing the obvious point that it is insane and depraved to punish the victims of prostitution with the controversial claim that it should be just plain legal is sloppy reasoning.

would be a reasonable title for this op-ed by Jonah Goldberg. I am getting seriously concerned as I have recently agreed with Charles Krauthammer and now I find an op-ed by Goldberg interesting and somewhat informative. I didn't even cringe at all of his attempts at wit. Uh oh.

His point is that many people who describe themselves as conservatives want the government to do more to help poor people, support an increase in the minimum wage and are suspicious of large corporations. Clearly he wrote the op-ed to explain the stunning success of Mike Huckabee. Clearly he didn't get it out before the New Hampshire primary (hey I'm not sneering I have trouble with deadlines too).

I would add that this is nothing new. Many people describe themselves as conservatives because they support traditional sexual mores (now allowing pre-marital sex and divorce so the burden is born by other people) and less separation of church and state. For some reason, these people were tricked into supporting the class awar by the richest 1% against the rest. It couldn't last.

Now, of course, I have complaints about the op-ed. One, of course, is that Goldberg thinks this is bad news and that the Republican party shouldn't change. When he discusses policy, he is dishonest and stupid "'compassionate conservative' -- a political program that apparently measures compassion by how much money the government spends on education, marriage counseling and the like." He slips in "marriage counseling" to make increased government spending sound silly. He directly asserts that spending on education is like spending on marriage counseling. This is so blatant that it is mildly funny. Of course no one proposes major government spending on marriage counseling (I do know a US government employed marriage counselor but she works for the defense department so it is OK).

Looking at crude data on policy and growth the noted pinko Robert Barro finds a postive effect of government spending on education on growth. No one has ever found any evidence that any country has ever spent too much on public education to maximize GDP. Also no country has ever industrialized without public education while countries have stayed poor for millenia without it. Similar results have not been obtained concerning public marriage counseling.

Also, following Pew, Goldberg does a Penn. He should tell the reader what fraction of self proclaimed conservatives support say an increased minimum wage. Instead he talks about a category "pro-government conservatives" who make up "just under 10 percent of registered voters" 94% of whom support an increase in the minimum wage. He is following the Pew Political Typology survey which probably included some raw data along with the neologisms. It would appear from the op ed that about one third of conservatives support an increase in the minimum wage.

I want data without neologisms. Data according to categories chosen before the data were analysed. The naming of groups is neither here nor there. Such analysis is neither causal analysis nor raw data.

I got the *.pdf. 77% of Republicans supported an increase in the minimum wage to $7.25. Now that is a fact. 69% of Americans agree that "the government should guarantee 'every citizen enough to eat and a place to sleep'". Most Americans supported welfare reform. Clearly the critical group in both majorities are idiots.

47% of Republicans think government should guarantee food and shelter for all. 58% of Republicans think the government should take care of people who can't take care of themselves.

Oh my god Americans are divided on whethey they want a smaller government provided fewer services (45%) or a bigger government providing more services (43%). I would have assumed that with no details on the services, people would be overwhelmingly for smaller government (hey I would be if the services are universal wiretapping).

The survey is fascinating. It is very hard to write an uninteresting column about it. Goldberg didn't manage. Did I ?

Referring to this NPR story, FP contributor and retired defense intelligence analyst John McCreary had this to say about the surge in his most recent NightWatch briefing:

Several retired US military officers explained in an interview on NPR yesterday that the success of the surge is economic, not military. The US pays the 70,000-80,000 fighters better than the tribal elders and al Qaida. Al Qaida tends to pay based on piece work – per operation -- whereas the US has put the tribal youth on salary. Retired General McCaffrey is quoted as saying at $10 per day per fighter the US can pay that indefinitely.

The payments began in May and the attacks declined shortly thereafter for the first time in three years. In this interpretation, it appears the US won the bidding war in a labor auction in a depressed economy where unemployment is about 50%. That at least makes sense in tying together all the other explanations.

The obvious question is, how can the U.S. military insure that these payments continue as the surge winds down? It hasn't been easy to convince the Shiite-dominated Interior Ministry to put former Sunni insurgents on the payroll, and any promises to do so once the U.S. reduces its footprint in Iraq likely wouldn't be worth a bucket of warm spit. But administering these salaries is going to require a certain number of Americans to work with tribal and local leaders, make the payments, and monitor how the funds are being used. And then those people need to be protected.

It's thorny issues like this one that U.S. presidential candidates such as Barack "out of Iraq in 16 months" Obama need to address. Hope is not a plan.

One of the enduring mysteries of the Bush Bremer cluster f*ck in Iraq is why they didn't send lots of money to young unemployed Iraqi men ASAP as "reconstruction workers" or something to keep them from making trouble. The idea that Iraq would be better served by giving Iraqi money to foreign contractors could only occur to a Republican.

However, I think Hounshell has a strange take on "lessons learned." He concludes that we have found a way to neutralise a major threat to Iraq for less than $300,000,000 a year and that we have to stay in Iraq because the chance that the Iraqi government will take advantage of this discovery is "worth a bucket of warm spit." We have to keep sending our sons and daughters to kill and die in Iraq, because the Iraqi government is too stupid to solve a major problem with minor money.

Maybe they are, but the world is full of countries with bad problems many of which have violent internal conflict as a result. Should we invade all of them to impose rational policies ? If not why Iraq ?

And I mean we spent hundreds of billions plus thousands of lives because it took us 4 years to figure out how to solve the problem with $800,000 a day. Who is calling whom stupid ?

Saturday, January 12, 2008

For some Mysterious Reason the exact same man appears in two Frank Luntz panels of undecided voters 4 months apart in different states. It appears that Luntz and Fox News are presenting an actor as an undecided voter.

Friday, January 11, 2008

"This episode is just about the most pitiful thing I have seen since Bush came to power, and believe me I've seen plenty."

He is referring to the Iranian speed boats which exchanged communications with a US nave vessel in the straights of Hormuz. and links to the NYT for

' The audio includes a statement that says, “I am coming to you,” and adds, “You will explode after a few minutes.” The voice was recorded from the internationally recognized channel for ship-to-ship communications, Navy officials have said. Naval and Pentagon officials have said that the video and audio were recorded separately, then combined. On Wednesday, Pentagon officials, who spoke on the condition of anonymity because they were not authorized to speak officially, said they were still trying to determine if the transmission came from the speedboats or elsewhere."

Fred Kaplan (via Paul Kiel) notes that the threat was not mixed with the obnoxious sound of a speed boat motor and so was clearly not coming from the speed boats.

Republican candidates were seriously pissed that the US navy didn't blow the Iranians out of the water. That would have made the incident just like the Gulf of Tonkin incident in which North Vietnamese speed boats did not attack the US navy.

Iran has released a transcript of the whole exchange (without the voice over) including

I think that they better rename that boat. "Tantoma" sounds too much like "Tonkin". I would rename it the "Dick Cheney" or the "Michael Ledeen".

To be serious, Kaplan concludes with a very important point

And yet, as Adm. Gary Roughead, the chief of naval operations, told the Boston Globe's Bryan Bender and Farah Stockman on Monday, the U.S. commanders have no systematic way to halt a conflict if it begins to spiral. "I do not have a direct link with my counterpart in the Iranian Navy," he said. "I do not have a way to communicate directly with the Iranian Navy or [Revolutionary] Guard."

Through the darkest days of the Cold War, Washington and Moscow maintained a hot line. During most of those times, there were parallel forums for communication between the two sides' senior officers. Iran doesn't pose anything remotely resembling the threat that the United States and the Soviet Union posed to each other in those years. Here is yet another reason to establish diplomatic relations with Iran. You don't have to be friends to talk.

In the long run, most people, or at least most families, do spend what they earn. (Why earn it if you're not going to spend it?) True, some of us die with money in the bank, but usually our children or grandchildren step in to spend the remainder for us. So, as far as your dynasty is concerned, a 20 percent income tax and a 20 percent sales tax are equally painful.

Landsburg must have noticed that aggregate consumption is lower than aggregate GNP. He apparently doesn't know that consumption and GNP appear to be cointigrated (have the same trend).

He appeals to utility maximization "Why earn it if you're not going to spend it?" and insists that we consider infinitely lived dynasties not finite lived individuals (who on average leave huge wealth when they die) but he is clearly completely unfamiliar with the model of a utility maximizing dynasty. let's consider the very simplest model. Instantaneous utility is the natural log of the flow of consumption (so marginal utility is the inverse of consumption). Dynasties maximize the flow of utility discounted by a rate of time preference rho. Assume that the marginal product of capital is a constant r and the wage grows proportional to the capital stock ((this means this is an endogenous growth model) This r is and must be the market real interest rate. If income is taxed at rate tau, the after tax rate is r(1-tau).lets say r>rho. Income is rK consumption is rhoK. Consumption is a constant fraction of income less than one.

Anyone with any knowledge of economic models of consumption must know that what landsburg says is a false claim about economic theory. Yet he is arguing that we should ignore the fact that people seem to consume less than they earn (and proportionally less if they are rich) because of a theoretical argument. I think this is always unwise, but in any case, he should brush up on the theory before arguing that it implies something which it does not at all imply.

Now let's have government spending. Replacing an income tax with a consumption tax implies an ever growing government deficit. If the old deficit was zero, total government debt will grow proportional to capital. This debt will be sustainable.

Fools support the "FairTax" because it would imply that no one has to file a 1040EZ ever again. I will be charitable and assume that Mike Huckabee is such a fool.

I have a proposal. The federal government introduces the "we will do it for you" program in which you authorise them to collect all the information related to your taxes, they collect it and they figure it for you. Along with your 1040 they send you a proposed filled in 1040. If you ignore the mailing, that determines your rebate (or what you owe). Otherwise you can just file a 1040 and they ignore their own calculations (law requires them to erase the data and not use them to detect evasion). That would be simple.

Oh I would also definitely and in any case withold more each month and make sure that almost everyone got a rebate after filing (or decided to not bother). This is a no brainer. I can see why Republicans haven't done this as they want people to hate tax day. I have no idea why the Clinton administration didn't do this, that is, make a tiny middle class tax cut which had no effect on amount withheld on paychecks but appeared once a year as a big fat check.

I guess some Arkansas governors are more cynical than others.

Now I have some sympathy for people who hate tax day.

I have filed the form which takes an estimated 6 hours to fill in (this was to take a deduction for my Italian taxes in the one year in which my income was well above median income for a US 2 parent family).

I live in Italy a country with a very complicated tax system. I have never filled in a 740 (Italian 1040). It is all handled by my employer. The reason for this simplicity is that investment income is "taxed" at the source, that is taxed at the same rate no matter what the recipients other income is. This is horrible, but only the still communists object, because everyone knows that everyone would evade.

A tax on payroll income can be collected without bothering the workers (how much time did you spend filling out your FICA tax returns). A tax on payroll and self employment income could be imposed bothering only the self employed. Such a tax need not be regressive like FICA. It could be fairly progressive except that the super rich would pay almost nothing (as in the fair tax). The FairTax already includes measurement of monthly income on top of the whole huge consumption tax machinery (which will not prevent evasion and everyone who has taxed consumption or value added knows that rates can't be that high).

If Huckabee proposed taxing only labor income, he would have a much better way to make April 15 an ordinary day. Also it would be clear how populist he really is. The fact that he has a strictly worse plan which is even more regressive and is accepted as a populist shows how defective our debate is.

If Mike Huckabee had proposed a completely different tax plan that has one point of similarity with the idiotic, doesn't-add-up, Scientologist-designed "FairTax" plan he actually proposed, then that completely different plan might be a good idea. So it is unfair to criticize him for offering the plan he actually offered.

As a sorta-kinda economist myself, I deeply resent the fact that many Slate readers probably think that Landsburg's stuff represents the way actual economists think, rather than being more finger exercises in vaguely economic reasoning: sometimes amusing, often disgustingly heartless and wrong-headed, never intellectually or morally serious.

I am now losing a struggle to find out just how bad Landsburg is. Also the first link is to an oped in the Wall Street Journal which is actually worth something. It is Bruce Bartlett's critique of the "Fair Tax" an easy target no doubt, but one left as smoldering ruins by the end of the column. Yes indeed, it was originally proposed by the Church of Scientology (makes enacting tax plans based on something Aurthur Laffer drew on a napkin look dignified).

Bartlett does miss one excellent point against the tax. "Since sales taxes are regressive--taking more in percentage terms from the incomes of the poor and middle class than the rich--some provision is needed to prevent a vast increase in taxation on the nonwealthy. The FairTax does this by sending monthly checks to every household based on income." The main (only) selling point of the FairTax is that, without income taxation, there will be no need to file tax returns every year to determine income. Instead they propose to determine income *every month*. Of course that is going to be simple. Now the 1040EZ does not continue on for a full page, because the IRS enjoys making things complicated. It does so because there are many sources of income. If FairTax proponents don't want to send that check to hedge fund managers, they will have to have people file forms every month. Then April 15th will no longer be special, because there will be a hassle on the 15th of every month.

Amusingly Bartlett makes an arithmetic error on a topic where he just argued about the exact calculation he blows. I see the Wall Street Journal's crack editorial staff applied their normal standards to an Op-Ed making a valid point.

I quote

If a product costs $1 at retail, the FairTax adds 30%, for a total of $1.30. Since the 30-cent tax is 23% of $1.30, FairTax supporters say the rate is 23% rather than 30%.

This is only the beginning of the deceptions in the FairTax. Under the Linder-Chambliss bill, the federal government would have to pay taxes to itself on all of its purchases of goods and services. Thus if the Defense Department buys a tank that now costs $1 million, the manufacturer would have to add the FairTax and send it to the Treasury Department. The tank would then cost the federal government $300,000 more than it does today, but its tax collection will also be $300,000 higher.

This legerdemain is done solely to make revenues under the FairTax seem larger than they really are, so that its supporters can claim that it is revenue-neutral. But for the government to afford to purchase the same goods and services, it would have to raise spending by the amount of the tax it pays to itself. The FairTax rate, however, is not high enough to finance the higher spending it imposes. Therefore the proposal only works if federal purchases are cut by 30%, close to $300 billion--the increased cost imposed by the FairTax

.

uh no. The dishonesty is impressive even coming from Chambliss, but he is assuming that federal spending would be cut by 23% not 30% that is to 77% of the current level not 70% of the current level 70%*1.3 = 91% not 100%. This is exactly the point that 1/1.3 is not equal to 0.7 but rather, roughly, 0.77 which Bartlett made immediately above then immediately forgot.

Bartlett is, of course, one of the more serious conservative commentators on fiscal policy. I dred to think what less serious commentators would write about the difficult concepts of addition subtraction and division.

Update: The prebate depends only on family size not income so the FairTaxers do not need to measure income ever, let alone monthly. I should have guessed that Bartlett was confused and should have checked. See comments (really one comment but that is way above average for my posts).

I am now reaching new extremes of linking to Mark Kleiman with two unrelated links to the same post

Second footnote I've always thought the following story, which I heard from my father, a very perceptive one:

The Lone Ranger, with his faithful Indian companion Tonto, is fleeing from a band of Comanches intent on taking his scalp. As they ride furiously over a pass, they confront another band of Apaches, evidently with the same intent. They are hopelessly trapped.

The Lone Ranger turns to Tonto and says, "Well, old friend, looks as if we've about had it."

Tonto replies, "What you mean 'we,' paleface?"

Like Tonto in the story, a middle-class white liberal always has the option of deciding to worry about something other than the "underclass" problem. A middle-class black, not so much.

This reminds me of the discussion two posts below which is related to Washington Insiderism and political addiction. I always thought that I was a political addict, then I met the young Washington insiders at a party at Michael Froomkin's house.

I recall him asking me if I knew the people there. I was embarrassed to say I didn't. He replied "neither do I. I was at a get together for people doing summer jobs on capitol hill and generally invited people here and they all came."

This was 1981. He said "it looks like we are in real trouble" and one of the mystery guests said "what do you mean we pale face." He was a Republican interning with the Reagan administration's liason to new right groups (and Native Americans). Thus presumably a very quick thinking wingnut with a sense of humor (I have no idea what happened to him).

Michael looked puzzled then said "ah yes your boss is part Native American" and the guy said that, yes he is one thirtysecond Native American so they tacked that on to his title which is silly since real Native Americans consider 1/32 about zero.

Then someone else said that the 1/32nd Native American was a racist causing considerable tension. The apparently shoot from the hip* mystery guest went on to demonstrate casual knowledge of dozens of people.

I was shocked. I had not often been totally totally outclassed in political nerd-dom.

I said nothing and wouldn't have even if I had known about the convincing critique of insiderdom (this was 81 and Washington hating was a sport for Republicans). Still it would have made me feel better to have read Atrios.

For a few days we had an African American Presidential front runner. Now we have "solidly middle class" single mothers. Mark Kleiman reports

A progressive colleague writes:

Based on Obama's speeches, I don't get a strong feeling that he identifies with the poor.

Based on "reading" The Audacity of Hope as an audiobook, I think that's true, but it only expresses half of the truth of the matter.

Obama doesn't identify with the poor in the sense that he doesn't think of himself as poor, or formerly poor, or having poor relatives. He grew up without much money, but in cultural terms his upbringing was solidly middle-class. (Maybe he has poor in-laws.)

Obama's parents separated when he was two. Look the guy is young, but that was not a solidly middle class experience in 63 or 63 when it happened. A "broken home" could not be solidly anything except an explanation of grimlife outcomes back then.

I remember (my parents just celebrated their 50th wedding anniversary and I my background is solidly upper middle class).

update: Welcome DeLongians. Now that he has sent you here I am going to do a little bate and switch and write more on what's wrong with people discussing issues with similar people. I have some sense of shame so the added text is at the end of the post.

John F. Harris and Jim VandeHei have a very good Nostra Colpa* on what is wrong with the campaign press. Mainly, they say they agree with everything that bloggers like Atrios have been writing about them and their colleagues. They don't have a very practical proposal for the way forward. Jonathan Chait once had a good idea, roughly "get on your duffs." In 2004, Chait wrote that he wasn't going to the Democratic convention which was the experience most like junior high he has had since junior high (key questions -- where are the good parties and how can I get invited). He said he could get all the information he needed from his office (or hell his house) in Washington, since it is on the web.

This would help Harris, VandeHei et al deal with their big problem II

2. The echo chamber

Check out the nicer restaurants in Manchester, N.H., or Des Moines, Iowa, in the political season and you will see the same group of journalists and pols dining together almost every night. We go to events together, make travel plans together and read each other's work compulsively. We go to the same websites — the Drudge Report, Real Clear Politics, Time’s “The Page” — to see what each other is writing, and it’s only human nature to respond to it.

That is one chief reason the “Hillary is inevitable” and “Hillary is toast” narratives developed so quickly and spread so rapidly.

How about just not going there. I don't mean not going to the nicer restaurants, I mean not going to Iowa and New Hampshire. If all they had to go on was politicians' speeches, press releases and web pages, their coverage would be more focused on the issues, more original and more valuable. The old fashioned idea that you have to be physically present to know what is going on helps trap reporters in the echo chamber.

It would also help with this other problem "reporters leave their homes, spouses and families for long stretches to cram into crummy hotels and smelly buses to cover campaigns."

Now there are two catch phrases about crowds "the wisdom of crowds" and "the madness of crowds." I prefer the second and not only because it is due to Isaac Newton. The first is talking about averages not crowds. It is a fact that if you ask many people for a forecast (or estimate or guess) of a number, the average forecasts (or ...) is , on average, much closer to the truth than most of the individual forecasts (in my experience better than the vast vast majority).

However, this occurs when the different forecasts (or estimates or etc) are made more or less independently then averaged. It is not the same if the participants are brought together and discuss till they reach a consensus. If you take a bunch of people and ask them about something then break them into groups and have them discuss it in their little groups, the opiinions in the little groups moves farther from the overall average and usually farther from the truth (See collected works of Thaler).

This is a direct contradiction of one of the core principles of liberalism which holds that debate and discussion are good for the quest for truth. A mechanical average works better.

This is unpleasant, but the fact that the best way to do their job is to do whatever else in life they enjoy and just stop obsessing on it should be welcome.

My advice -- get a life

(needless to say I haven't followed my own advice).

quick update: I wrote this just before reading this excoriating Maureen Dowd for reporting on New Hampshire while she was in Jerusalem. Sargent does have a point, of course, the column is datelined New Hampshire which is misleading (but allowed according the NYT rules since Dowd had been in New Hampshire). It included reporting by an assistant whose name appears nowhere. Unfair but I don't care. The reporting is on statements by ordinary people not campaign flaks, so it is not at all what I was talking about above.

*that's Italian. I don't read or write Latin.

update II: The problem of people with similar backgrounds discussing the issues is more serious than a few bad predictions. It can lead the opinion of each person in the group towards views that have some appeal to everyone in the group. This can have terrible results if the group consists only of people with the same self interest. A rich person would have to be selfish to decide his views on tax policy based only on self interest. A group of rich people discussing the matter will find that the consensus puts high weight on the view that reduced taxation of rich people have excellent incentive effects. This can happen just because everyone winces if someone proposes raising taxes on rich people. Unfortunately Washington insiders are, on average, rich.

The same group think that lead reporters to think that "everyone who knows anything agrees that Clinton is toast" can lead Washington insiders to think that "class war is bad" or "Social Security is an immensely expensive program which doesn't do anything significant for anyone who matters". Class interest can be much more influential than individual interest if people discuss matters exclusively with other members of their class.

Wednesday, January 09, 2008

Thomasina Bradley ?

Matthew yglesias asks if Obama's surprising loss could be due to the Wilder effect, that is Black's do less well in the actual vote than in opinion polls. He argues that this is not what happened because the difference in the real vote vs the polls was concentrated among women.

I should say we're seeing some talk of a "Wilder effect" possibly doing Obama in. I don't buy that. If you look at the breakdown of the results, you'd need to believe that white women, but not white men, are inclined to lie to pollsters about that. More likely we're looking at a combination of gender backlash, plus the fact that Obama was so widely perceived as likely to win led independents to vote for John McCain in the GOP primary.

I agree and think his explanation is about as good as we are going to get. To be a devil's advocate, I could argue that there are two effects which cancel among men. White men who vote on race claim to be undecided and so do White men who vote on gender under these circumstances. I have to deal with the fact that there is no past data showing women doing better in opinion polls than in the actual vote.

OK so how about stong women who are considered to be cas_______ bi_____ ? Or how about presidential candidates who almost cry [I would ask my research assistant to look up data on the Musgee if I had one].

To be serious, I can see three explanationsI. What Matt saidII. What Clinton said, that is, she appealed to people when she showed emotion.III. Another think Matt said "I don't think pissing off Chris Matthews is a good enough reason to pull the lever for Clinton, but I can certainly understand the impulse."

Monday, January 07, 2008

Risking self parody, I am not referring only to myself in my capacity as Hillary Clinton campaign consultant but also to her real life campaign consultants.

Thomas Edsall has been talking to them and has the low down on leaked proposed strategies to stop Obama which include

"This Clinton supporter described Obama as afflicted with naïve idealism similar to that of Jimmy Carter.

The burden on Clinton will be, according to this strategist, to show that "this guy [Obama] is amateur hour, that it's all glitz. He thinks you can get there but you don't have to go through anything. It's dreamy, but it mainly appeals to independents.""

Yep amateur hour is the word. Sure lot's of African Americans whose parents separated when they were two have had it all so easy that they don't have any idea what Hillary Clinton has been through. And all those people fortunate enough to have been raised by single mothers part of their lives will now vote for Hillary Clinton because they can't stand fortunate sons like Barak Obama.

Now Obama is soaringly eloquent so he is very good at rhetoric no doubt about that. However, being bad at rhetoric doesn't mena you get results (I've personally proven that). Senator Clinton did not get health care reform enacted. Perhaps since then she has gotten a result or two, but I have no idea what they might be. Obama, in contrast, managed to get unanimous support in the Illinois senate for a bill, originally opposed by the police and the newly elected Democratic governor (who signed the bill int he end) requiring the police to videotape interrogations.

Clinton would have a better case if she argued that the key skill for a US President is the ability to play basketball.

The amazing thing is that a very strong case against Obama is easily available on the obscure op-ed page of the New York Times. Clinton should fire her staff and call Krugman. The case against Obama (made by Clinton in an even in New Hampshire which I watched on C-Span and ignored by her flaks) is that Obama proposes a plan for non universal health care. The Obama plan for health care financing will not work and everyone who has studied the issue (including I suspect Senator Obama) knows it.

I thought that it would be impossible to argue for mandates in New Hampshire (real motto "let me live tax free or you die"). Clinton did it. She said that Obama's proposal was not universal and was unilaterally conceding that critical point to the Republicans.

This is a very powerful argument. It also has the minor advantage of being true.

The argument that Obama can not win legislative battles and Clinton can is, in contrast, similar to the argument that Edwards can't be elected because he has bad hair.

Sunday, January 06, 2008

Mitt is running scared.

Watching him on C-Span

Romney now knows he has to gamble to win. He just boasted about Massachusetts health care and said "greenhouse gasses". Clearly pretending to be the farthest right Republican didn't work, so he's flip flopping again.

Saturday, January 05, 2008

I am watching "Inside Washington" and I have had a very disturbing experience.

Charles Krauthammer spoke and I agree with everything he said from beginning to end.

The question was about issues raised in the Republican contest in Iowa. He said there were none, that it was absolutely sterile. He attached Huckabee in particular for being all about image and not saying anything about any issues.

Look below and see that Krauthammer and Waldmann are in complete agreement on this key issue.

Friday, January 04, 2008

His point is that US voters are ignorant and irrational and it matters. However, he overstates his case in two ways

1. "Surely Americans want serious change on Iraq, you say? True, some 60 percent of Americans now say the war was a mistake. But given the available options, voters are still getting what they want. If Iraq were a stable and enthusiastic ally, we'd like to leave today, but that's not on the menu. Most Americans now favor a timetable for withdrawal, but how many would want to stick to a schedule if that means handing Iraq over to radical Islamists? In a few years, the majority may be ready for "peace at any price" -- but not yet."

This is nonsense. Most Americans want a to impose a timetable for withdrawal. They are not getting what they want. Caplan argues that they might change their minds if they are convinced that the policy they currently support will lead to a worse outcome than he imagines they currently imagine. With this sort of argument, he can prove that people don't support any policy no matter how strongly they support it.

For some reason, Caplan has decided to ignore the fact that the clear wish of the majority of Americans on the most important issue of the day is not being obeyed. His argument to support his refusal to accept this clear fact would enable him to ignore any fact at all about public opinion. Caplan has decided that he knows better than the American people what they really want and, if they disagree with him, it just shows that they are too ignorant to understand the issue. This in an article allegedly about public opinion.

Caplan is similarly dismissive of protectionists. I agree with him on that issue, but don't think I know enough to be sure we are right and I'm an economist.

2.. "there is only the tiniest correlation between income and party. " This is a quantitative argument. However, Caplan does not say anything about how large is the allegedly tiny correlation. Let's ask the Google. First link here.

"Upper Income Quintile (Annual household income above approx. $92,000, in 2005 dollars): In 2005, the GOP edge over Democrats among people in this income bracket is 38%-27%"

"Lower Income Quintile (Annual household income below approx. $19,000): Republicans continue to trail by sizable margins in this income bracket. Currently the Democrats enjoy a 42%-20% advantage overall, comparable to their 43%-18% edge in 1992. Among whites, the Democratic edge is 37%-24% now and had been 37%-22% back in 1992."

That does not seem to me to be a tiny correlation.

In any case, Caplan really should not make a claim about the magnitude of a correlation without giving numbers. People (including I would say Caplan) have a lot of trouble with the idea that correlations are not all 1 0 or -1, that is, tend to assume that if a is positively correlated with b and b is positively correlated with c then a must be positively correlated with c, that is, they interpret "positive correlation" to mean "correlation 1" then when this isn't true (red states are poorer than blue states on average) they conclude that the correlations must be so small as to not matter (so positive correlation becomes zero correlation).

I agree with Caplan that the voters are ignorant and irrational, however I also agree with Churchill that Democracy is the worst possible system of government except for all of the other ones which have been tried. Caplan convinces me that journalists such as Caplan are even less qualified to decide policy questions than the electoral process, because voters, at least, do not all share the same fact resistant views on critical issues.

I tried to figure out his policy proposals. He seems to be in favor of life liberty and the pursuit of happiness. Also he doesn't like hate and likes families.

The rest is all about how it isn't about Mike Huckabee but all the people who welcomed Mike Huckabee into their state. Also We the People are the ruling class of America.

Rest about the campaign and winning and about how its about up not right or left.This is the dumbest line I have heard yet in the campaign.

Of course no pundit mentioned that his only policy proposal is to take from the poor and give to the rich.

The man bases his campaign on his persona.

I'm worried. Only a total idiot would vote for someone who has no policy proposals. Does Huckabee have a majority ?

Update: CNN has declared Obama the overall winner. No one seems to want to mention Republicans. Gergen tried. He said something like "there were two important speeches tonight. Mike Huckabee. He transcended the issues."

One of us is totally out to lunch. I would note that I discuss the tax increases proposed by Rangel to balance the reform of the AMT. Will does not.

I have no idea why he wants to present a huge increase in the progressivity of the tax code as Reganite. I know doesn't like to admit that Reagan cut rich people's taxes and raised non-rich people's taxes (that is FICA). Still the boldness of his absurd claim is bracing.

Wednesday, January 02, 2008

To make it worse, they now claim to have methods for picking up on my irritation and responding to it.

[snip]

Maccario emphasized that the program takes into account the typical stress many of us experience when traveling, especially during the holidays.

Ordinary people who are feeling anxious are “much more open with their body movements and their facial expressions as compared to an operational terrorist (thinking) ‘I’ve got to defeat security,’ ” Maccario said. “We’re looking for behavior indicators that show a certain level of stress, fear or anxiety above and beyond that shown by an anxious member of the traveling public.”

Now how much experience with terrorists does Maccario have ? It is not possible to learn the behavior typical of a terrorist attempting to board an airplane without extensive observation of terrorists attempting to board airplanes.

Extensive experience harassing non terrorists (some of whom were arrested and none of whom has been prosecuted) is not helpful.